Slide 1: Centrica plc Preliminary Results
centrica Centrica plc Preliminary Results transition to a lower carbon future
Slide 2: Disclaimer
centrica Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares or other securities. This presentation contains certain forward-looking statements with respect to the financial condition, results, operations
Slide 3: Iain Conn, Group Chief Executive
centrica lain Conn Group Chief Executive
Slide 4: Key messages
centrica Key messages ¢ Stable year-on-year underlying operating profit, but financial performance and dividend impacted by commodity prices and regulatory intervention ¢ 2019 AOCF and net debt within target ranges, H2 adjusted EPS significantly improved vs H1 2019 ¢ Consumer account growth and indi
Slide 5: 2019 performance headlines
centrica 2019 performance headlines ¢ EBITDA of £2,119m (down 13%) and adjusted gross margin of £3,852m (down 9%) ¢ Adjusted operating profit down 35% at £901m, adjusted EPS down 35% to 7.3p ¢ Correcting for UK tariff cap and external factors, adjusted operating profit down 2% ¢ Adjusted operating c
Slide 6: 2020 earnings momentum
centrica 2020 earnings momentum Legacy + Adjusted operating loss of up to £100m in 2020 * Expanding gross margin in energy : . as services and solutions 9 contract * Expanded unit gross margins in UK Home energy supply, including the one-off price cap impact Customer facing © Tenigitiing) sim ci Ges
Slide 7: Strategic progress
centrica Strategic progress Re-iteration of purpose and strategy in July 2019 Strategic Update - "Satisfying the changing needs of our customers, enabling the transition to a lower carbon future” - Focus on: (i) energy supply and its optimisation and (ii) services and solutions centred around energy
Slide 8: Chris O'Shea, Group Chief Financial Officer
centrica Chris O'Shea Group Chief Financial Officer
Slide 9: Commodity prices and our exposure
centrica Commodity prices and our exposure Average Brent oil prices Average UK NBP gas prices Average UK baseload power prices ($/bbl) (p/th) (£/MWh) + £50 ee £35 £35 2014 2015 2016 2017 2018 2019 2020 2020 2014 2015 2016 2017 2018 2019 2020 2020 2020 asat as at asat asat Ssat 31Dec 19 11 Feb 20 31D
Slide 10: Financial headlines
Financial headlines Year ended 31 December 2018" 2019 A Adjusted revenue (£m) 27,381 26,825 (2%) Adjusted gross margin (£m) 4,253 3,852 (9%) Adjusted operating profit (£m) 1,392 901 (35%) Adjusted effective tax rate 41% 34% (7ppt) Adjusted earnings (£m) 631 419 (34%) Adjusted basic earnings per shar
Slide 11: Exceptional items and certain re-measurements
Exceptional items and certain re-measurements Year ended 31 December 2019 £m p/share Adjusted earnings attributable to shareholders 419 7.3 Pre-tax exceptional items (1,103) Total impairments (934) Restructuring costs (356) Net pension change 152 Net gain on disposal 35 Tax on exceptional items 116
Slide 12: Group: adjusted operating profit drivers
centrica Group: adjusted operating profit drivers UK default xine? Underlying : external tariff cap ¢ Consumer actors £1,392m (£300m) (176m —_—_ J (£125m) Inflation: (£108m) Commodity: (£99m) Weather: £53m 2018 Other: (£22m) Underlying Underlying Efficiencies Business Upstream £114m £315m £901m ~ 7
Slide 13: Consumer: adjusted operating profit drivers
centrica Consumer: adjusted operating profit drivers £750m Inflation, FX, . . UK default capacity market, Weath Underlying Efficiency tariff cap pension cles eather margin programme rate £229m £505m £55m a ee toe (oe _ (£104m) (£125m) The above adjusted figures are before exceptional items and certa
Slide 14: Business: adjusted operating profit drivers
centrica Business: adjusted operating profit drivers Inflation, FX, capacit EM&T Underlying Efficienc’ pacity \ y y bad poe ae margin programme weather £40m £217m com £56m £75m fC (£11m) The above adjusted figures are before exceptional items and certain remeasurements. Adjusted operating profit inc
Slide 15: Energy Marketing & Trading and legacy gas contracts
centrica Energy Marketing & Trading and legacy gas contracts EM&T adjusted operating profit excluding legacy contracts (£m) 106 a EI 2015 2016 2017 2018 2019 Future legacy contracts based on extrinsic value of contract before any optimisation or take or pay decisions. Spalding contract excluded, EM&
Slide 16: Upstream: adjusted operating profit drivers
centrica Upstream: adjusted operating profit drivers Commodity, Inflation, Nuclear Spirit CSL pirit field [Efitatenay Bdesrecr) volume volume volume specific rooramnme an er and cost and cost and cost write-off Prog £567m i (£115m) || (£103m) [a £46m £179m (£73m) | | 2018 (£47m) The above adjusted f
Slide 17: Upstream operational performance and progress
centrica Upstream operational performance and progress 2019 Nuclear output impacted by extended outages at Hunterston B and Dungeness B 2019 total E&P production in line with expectations 2020 Spirit Energy production expected to be in line with 2019; 2020 CSL production expected to be in the range
Slide 18: Cash flow
Cash flow centrica Year ended 31 December (£m) 2018 2019 Year ended 31 December (£m) 2018 2019 EBITDA 2,447 2,119 Adjusted operating cash flow 2,245 1,830 Tax (61) (92) Net investment (968) (565) Dividends received 22 1 Organic investment (926) (781) Working capital 9 (38) Acquisitions (88) (31) Oth
Slide 19: £315m of efficiencies delivered in 2019
centrica £315m of efficiencies delivered in 2019 79 Revenue FX Inflation Efficiency | investment Prog and other! £108m £315m £4,468m _£33m P| £100m £4,394m 2018 controllable @ @ Costs of goods sold like-for-like costs @ @ Operating costs controllable costs 1. Other includesrevenue investment, servic
Slide 20: Targeting £2bn of efficiencies 2015-22
centrica Targeting £2bn of efficiencies 2015-22 Exceptional restructuring 619 £950m Exceptional restructuring £421m = (£1,255m) £294m i @ @ Costs of goods sold £5.0bn P| Inflation @ @ Operating costs FX ~£300m ~(£350m) © Growth opex Efficiency Other / 2020-22 2020 ~(€50m) ~£4-2bn programme _ one off
Slide 21: Balance sheet and pension deficit
centrica Balance sheet and pension deficit ¢ Continue to target strong investment grade credit ratings nat maturity profile Mm, ¢ £4.2bn committed revolving credit facility renewed with 800 21 banks in February 2019 600 Hybrid bonds @ Borrowings e IAS 19 net pension deficit of £163m ¢ Triennial pens
Slide 22: Divestments
centrica Divestments ¢ Announced intention in February 2018 to divest shareholding in Nuclear by end 2020 - Impact of outages on disposal process ¢ Announced intention in July 2019 to exit Spirit Energy via a trade sale by end 2020 - Process commenced H2 2019 - Initial bids expected around the end o
Slide 23: Cash flow and P&L post-divestment pro-forma
centrica Cash flow and P&L post-divestment pro-forma Sources and uses of cash flow : (£m) 2020 guidance Pension deficit payments @ Exceptional items @ Dividends @ Capex and acquisitions @ Interest Announced disposals? @ AOCF Existing Excl.Spirit Existing Excl.Spirit portfolio & Nuclear portfolio & N
Slide 24: Group financial framework to 2022
centrica Group financial framework to 2022 Targets Adjusted operating cash flow Dividend Controllable costs Capital discipline Credit rating ROACE Metrics * Growth over the medium term * Progressive dividend from 2019 rebased level linked to growth in earnings and operating cash flow * Dividend cove
Slide 25: 2020 financial outlook
centrica 2020 financial outlook 2020 adjusted operating cash flow expected to be in the range £1.6bn-£1.8bn based on 31 Dec 2019 prices - Current commodity prices indicate around bottom end of range Continued financial discipline — expect sources and uses of cash flow to remain broadly balanced Cust
Slide 26: 2020 Group targets
centrica 2020 Group targets ¢ Expect AOCF to be in the range £1.6bn-£1.8bn based on 31 December 2019 commodity prices, assuming the existing portfolio ¢ Targeting a further £350m of cost efficiency savings - Targeting an additional £50m of IT change capex efficiencies ¢ Total cash capital expenditur
Slide 27: Iain Conn, Group Chief Executive
centrica lain Conn Group Chief Executive
Slide 28: Agenda
Agenda ¢ The changing energy landscape and Centrica’s purpose and strategy ¢ Strategic progress in Centrica Consumer Customer account growth in Consumer UK energy supply market dynamics Rebasing UK Home and improving competitiveness Growth in UK Home services Consumer services and solutions built ar
Slide 29: Centrica and the changing energy landscape
centrica Centrica and the changing energy landscape ¢ Fundamental trends in energy and services - Decentralisation of the energy system and distributed technology supporting decarbonisation - Choice, power and influence moving to the customer - Digitalisation accelerating proposition development, en
Slide 30: Centrica's purpose and strategy
Centrica’s purpose and strategy Purpose: Satisfying the changing needs of our customers, enabling the transition to a lower carbon future A “21st Century Energy Services and Solutions Company”, focused on distinctive strengths - Energy supply and its optimisation - Services and solutions centred aro
Slide 31: Centrica's climate change ambition and progress
centrica Centrica’s climate change ambition and progress abling the transition to a lower carbon energy future Help our customers reduce emissions in line with Paris goals 2022 Help our customers reduce their emissions by 15%, by direct (target 2%) and indirect action 2030 Help our customers reduce
Slide 32: Centrica Consumer strategic pillars and capabilities
centrica Centrica Consumer strategic pillars and capabilities Energy Supply Largest energy supplier in the UK, top 3 positions in Ireland and North America Improved customer service Enhanced digital and segmentation capabilities Competitive cost base with significant further potential Bundling energ
Slide 33: Centrica Business strategic pillars and capabilities
centrica Centrica Business strategic pillars and capabilities Energy Supply ¢ Largest energy supplier to SME customers in the UK, second largest competitive retailer in North America ¢ Customer service improved to leading levels ¢ Competitive cost base with significant further potential Energy Optim
Slide 34: Customer-led gross margin
Customer-led gross margin Consumer Division (fon) 6 25% 20% 10 15% 5 10% 5% ° 0% 2015 2016 «= -2017.-—=s 2018 ~—-2019 Closing accounts 27.4m 267m 25.4m 25.1m 25.6m Gross margin Vaccount £104 £109 £109 £104 £90 @ Revenue (fbn) 1, Includes UK Business, NA Business and Centrica Business Solutions. @ Gr
Slide 35: Customer account growth in Consumer
Customer account growth in Consumer Consumer accounts (‘000s) 25,137 i; 24,880 UK 21,161 20,857 | (33) Energy collective tariff/ white label (275) 367 UK energy online 367 (105) 7 Energy prepayment (105) (305) Other energy tariffs (273) 357 Services growth 364 centrica 441 25,602 Centrica Home Solut
Slide 36: Stabilisation in UK Home energy customer accounts
centrica Stabilisation in UK Home energy customer accounts 15,000 10,000 5,000 0 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 14,788 14,733 14,659 14,260 14,250 13,873 12,874 12,533 12,132 11,954 11,846 UK energy supply customer accounts ('000s, period end)
Slide 37: UK Energy Supply market dynamics
centrica UK Energy Supply market dynamics UK market switching! Competitive on price comparison sites? 750,000 650,000 2018 Supplier 1 £849 /yr 550,000 450,000 Supplier 2 £858 /yr 350,000 2018 250,000 Supplier 3 £863 /yr | Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Supplier 4 £867 /yr Number of
Slide 38: Rebasing UK Home: Objectives
centrica Rebasing UK Home: Objectives Oo Further improve levels of competitiveness ¢ Move towards lowest cost per customer in the energy supply market ¢ Reduce cost per customer in in-home servicing to top quartile Innovate and improve our agility to more quickly respond to the needs of our customer
Slide 39: Rebasing UK Home: Plans and progress
centrica Rebasing UK Home: Plans and progress Overall ° Energy O In-home . servicing Organise around customer end-to-end journeys Transform technology to be more flexible and lower cost Simplify the organisation, reduce non-customer facing roles Improve coverage and quality of digital journeys to en
Slide 40: Improving competitiveness in UK Home
centrica Improving competitiveness in UK Home UK Home energy cost per customer’ (£) 111 106 <— Projected first quartile 85 performer <— Projected lowest cost supplier in market 2018? 2019 2022 1, Includes all adjusted operating costs. 2019 and 2022 figures adjusted for inflation and stated in 2018 r
Slide 41: 3700 2.2 3600 3500 1.8 3400 1.6
3700 2.2 3600 2 3500 1.8 3400 1.6
Slide 42: Consumer services and solutions built around energy
centrica Consumer services and solutions built around energy Strong track record of innovating for our customers; propositions increasingly focused on enabling the transition to a lower-carbon future . Enhanced digital (next gen“ * »> Hive smart thermostat app, web-chat, voice skills, = Local engine
Slide 43: Centrica Home Solutions Growth
centrica Centrica Home Solutions Growth Cumulative Hive products, hubs, subscriptions ('000) 4,091 @ Cumulative products - UK @ Cumulative customers — UK @ Cumulative products — Rest of World Cumulative customers — Rest of World @ Cumulative subscriptions 2016 2017 2018 2019 43 Preliminary Results 2
Slide 44: Refocusing Home Solutions
Refocusing Home Solutions Progressing plans e Exited North America with focus now on the UK and Ireland e Revenue up 10% and gross margin percentage up to 22% e Average revenue per customer up 11%, subscriptions up 34% vs 2018 ¢ Significant reduction in costs and investment - CHS headcount reduced b
Slide 45: Business Solutions capabilities
centrica Business Solutions capabilities Business - integrating capabilities to develop innovative customer proposi centrica BAS Centrica smartwatt Business Solar PV Solutions Gen so.ar Delivery Energy Efficiency (rebrand) capabilities Delivery capabilities Y Distributed Energy On-site Energy optimi
Slide 46: Growing Centrica Business Solutions
centrica Growing Centrica Business Solutions Revenue, order intake and order book * Utilising distinctive capabilities 03 - Integration of multiple technologies - Leverage existing customer base - Lower carbon solutions ¢ Further growth delivered in 2019 - Revenue up 36% to £285m - Secured order boo
Slide 47: New York City Housing Authority
centrica New York City Housing Authority Customer needs met © Peace of mind, reliability and resilience ah , Stipe ee) §=° ~Reduce management burden © Greater visibility and control by remote real time monitoring centrica Business Solutions pp ies 7.4Bcf p.a. PowerRadar ess 5 9 Benefit to Centrica D
Slide 48: Royal Devon and Exeter NHS Foundation Trust
centrica Royal Devon and Exeter NHS Foundation Trust , . Customer needs met Services provided ¢ Improved efficiency - £800k guaranteed reduction in energy LED lighting costs p.a. Solar PV - 2,200 tonnes CO, reduction equivalent of 1,450 cars HVAC ¢ Modernisation of energy assets and covers CHP backl
Slide 49: Energy Marketing & Trading activities
centrica Energy Marketing & Trading activities Servicing + Large portfolio of customer demand and legacy asset positions Maen) * Competitive advantage in UK market Risk Capital @ Trading @ Other 0% + ~14GW of assets under management in Europe for route to market services + Volatility value capture i
Slide 50: Improving returns in North America Business
centrica Improving returns in North America Business ral year gross margin 2015 - 2019 Forward net margin under contract ($m ) ($m) 1,000 Gas Power @ Optimisation 500 @ © Supply 600 40 P| P| Z @ 2019 net margin under contract as at December 2018 200 @ 2020 net margin under contract 0 | | || || || ||
Slide 51: Key messages
centrica Key messages ¢ Stable year-on-year underlying operating profit, but financial performance and dividend impacted by commodity prices and regulatory intervention ¢ 2019 AOCF and net debt within target ranges, H2 adjusted EPS significantly improved vs H1 2019 ¢ Consumer account growth and indi
Slide 52: Q&A
centrica O&A lain Conn Chris O’Shea Sarwjit Sambhi Richard Hookway Group Chief Group Chief Chief Executive, Chief Executive, Executive Financial Officer Centrica Consumer Centrica Business 52 Preliminary Results 2019
Slide 53: Disclaimer: Rules of thumb
centrica Disclaimer: Rules of thumb The rules of thumb were provided in February 2020 based on the then current prevailing range of oil, gas and power prices. They are illustrative and are intended as directional only and exclude any potential impairment or impairment write-back. The actual impact o
Slide 54: Rules of thumb: E&P and Nuclear
centrica Rules of thumb: E&P and Nuclear Please refer to disclaimer on slide 53 of this presentation before using this information. The table shows Centrica’s profit after tax (PAT) and adjusted operating cash flow (AOCF) sensitivity to changes in commodity prices on a hedged basis for 2020 as at 6
Slide 55: Revenue
Revenue Year ended 31 December (£m) 2018! 2019 A UK Home 8,392 8,260 (2%) Ireland 907 897 (1%) North America Home 2,533 2,754 9% Centrica Home Solutions 67 74 10% UK Business 1,857 2,065 11% North America Business 8,820 8,115 (8%) Centrica Business Solutions 209 285 36% Energy Marketing & Trading 3,
Slide 56: Adjusted gross margin
Adjusted gross margin Year ended 31 December (£m) 2018 2019 A UK Home 1,854 1,575 (15%) Ireland 135 149 10% North America Home 604 575 (5%) Centrica Home Solutions 13 16 23% Total Centrica Consumer 2,606 2,315 (11%) UK Business 234 227 (3%) North America Business 406 437 8% Centrica Business Solutio
Slide 57: EBITDA
EBITDA Year ended 31 December (£m) 2018 2019 A UK Home 815 547 (33%) Ireland 57 68 19% North America Home 179 172 (3%) Centrica Home Solutions (67) (64) 4% Total Centrica Consumer 983 723 (26%) UK Business 55 63 15% North America Business 125 138 10% Centrica Business Solutions (59) (38) 36% Energy
Slide 58: Adjusted operating profit
Adjusted operating profit Year ended 31 December (£m) 2018 2019 UK Home 668 401 Ireland 44 52 North America Home 123 137 Centrica Home Solutions (85) (84) Total Centrica Consumer 750 505 UK Business 40 48 North America Business 81 96 Centrica Business Solutions (81) (68) Energy Marketing & Trading 3
Slide 59: Adjusted operating cash flow
centrica Adjusted operating cash flow Year ended 31 December (£m) 2018 2019 A UK Home 805 714 (11%) Ireland 74 76 3% North America Home 187 166 (11%) Centrica Home Solutions (47) (43) 9% Total Centrica Consumer 1,019 913 (10%) UK Business 62 128 106% North America Business 278 181 (35%) Centrica Bus
Slide 60: Centrica Consumer
Centrica Consumer ADJUSTED OPERATING PROFIT / (LOSS) Year ended 31 December (£m) 2018 2019 A UK Home 668 401 (40%) Energy 466 137 (71%) Services 202 264 31% Ireland 44 52 18% North America Home 123 137 11% Energy 135 145 7% Services (12) (8) 33% Centrica Home Solutions (85) (84) 1% Centrica Consumer
Slide 61: Centrica Business
Centrica Business ADJUSTED OPERATING PROFIT / (LOSS) Year ended 31 December (£m) 2018 2019 A UK Business 40 48 20% North America Business 81 96 19% Centrica Business Solutions (81) (68) (16%) Energy Marketing & Trading (EM&T) 35 141 303% Core EM&T activities 87 138 57% Legacy gas contracts (53) 3 nm
Slide 62: Upstream
Upstream ADJUSTED OPERATING PROFIT / (LOSS) Year ended 31 December (£m) 2018 2019 A Spirit 337 90 (73%) CSL 184 70 (62%) Nuclear 46 19 (59%) Centrica Upstream 567 179 (68%) ADJUSTED OPERATING CASH FLOW Centrica Upstream 1,012 635 (37%) The above adjusted figures are before exceptional items and cert
Slide 63: Upstream — Exploration & Production
Upstream — Exploration & Production E&P Year ended 31 December (£m) 2018 2019 A Gas and liquids realisations 1,977 1,610 (19%) Adjusted operating profit 521 160 (69%) Adjusted operating cash flow 963 587 (39%) Free cash flow 483 141 (71%) Average gas Average liquids sales price sales price (p/therm)
Slide 64: Upstream — Nuclear
Upstream— Nuclear NUCLEAR Year ended 31 December 2018 2019 A Adjusted operating profit (£) 46 19 (59%) Nuclear power generated (GWh) 11,820 10,199 (14%) Achieved power price (£/MWh) 45.1 49.2 9% Achieved power price (£/MWh) 2018 45.1 2019 49.2 Nuclear power generated (GWh) 11/820 2019 9 @ Other Powe
Slide 65: Net investment
Net investment Year ended 31 December (£m) 2018" 2019 Centrica Consumer 223 143 Centrica Business? 243 123 Upstream 497 480 Other? 51 66 Capital expenditure (including small acquisitions) 1,014 812 Net disposals (46) (247) Group net investment 968 565 1. Restated for changes in segmentation 2. 2018
Slide 66: Net debt
Net debt Year ended 31 December (£m) 2018 2019 Opening net debt (2,596) (2,656) IFRS 16 impact! 0 (394) Adjusted net cash inflow / (outflow) (60) (93) Other movements in net debt 0) (38) Closing net debt! (2,656) (3,181) Cash posted as collateral (290) (326) Closing net debt excluding cash posted as
Slide 67: CDP and TCFD
CDP and TCFD DISCLOSURE INSIGHT ACTION A LIST 2019 CLIMATE TCFbD centrica * CDP is a global non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. It was voted the number one climate research provider by investors. ¢